[Federal Register Volume 63, Number 121 (Wednesday, June 24, 1998)]
[Notices]
[Pages 34494-34496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16754]
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SECURITIES AND EXCHANGE COMMISSION
Extension; Comment Request
Upon written request, copy available from: Securities and Exchange
Commission, Office of Filings and Information Services, 450 Fifth
Street, N.W., Washington, D.C. 20549.
Extension:
Form N-2, SEC File No. 270-21, OMB Control No. 3235-0026
Form N-5, SEC File No. 270-172, OMB Control No. 3235-0169
Form N-8A, SEC File No. 270-135, OMB Control No. 3235-0175
Rule 17f-5, SEC File No. 270-259, OMB Control No. 3235-0269
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collections
of information summarized below. The Commission plans to submit these
existing collections of information to the Office Management and Budget
for extension and approval.
Form N-2--Registration Statement of Closed-end Management
Investment Companies
Form N-2 is the form used by closed-end management investment
companies (``closed-end funds'') to register as investment companies
under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.]
(``Investment Company Act'') and to register their securities under the
Securities Act of 1933 [15 U.S.C. 77a et seq.] (``Securities Act'').
Section 5 of the Securities Act [15 U.S.C. 77e] requires the filing of
a registration statement prior to the offer of securities to the public
and that the statement be effective before any securities are sold. The
primary purpose of the registration process is to provide disclosure of
financial and other information to investors and potential investors
for the purpose of evaluating an investment in a security. Section 5(b)
of the Securities Act requires that investors be provided with a
prospectus containing the information required in a registration
statement prior to the sale or at the time of confirmation or delivery
of the securities.
A closed-end fund is required to register as an investment company
under Section 8(a) of the Investment Company Act [15 U.S.C. 80a-8(a)].
Form N-2 permits a closed-end fund to provide investors with a
prospectus covering essential information about the fund when the fund
makes an initial or additional offering of its securities. More
detailed information is provided
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to interested investors in the Statement of Additional Information
(``SAI''). The SIA is provided to investors upon request and without
charge.
The Commission uses the information provided in Form N-2
registration statements to determine whether closed-end funds have
complied with the requirements of the Investment Company Act.
The Commission estimates that closed-end funds file 44 initial
registration statements and 39 amendments to registration statements--a
total of 83 filings--on Form N-2 each year. Based on consultations with
a sample of recent filers, it is estimated that the hour burden to
prepare and file an initial Form N-2 filing is 500 hours and the hour
burden to prepare an amendment is 100 hours. The total hour burden for
all closed-end funds filing Form N-2 is 25,900 hours per year.
Form N-5--Registration Statement of Small Business Investment
Companies
Form N-5 is the integrated registration statement form adopted by
the Commission for use by a small business investment company which has
been licensed as such under the Small Business Administration and has
been notified by the Administration that the company may submit a
license application, to register its securities under the Securities
Act and to register as an investment company under section 8 of the
Investment Company Act. The purpose of registration under the
Securities Act is to ensure that investors are provided with material
information concerning securities offered for public sale that will
permit investors to make informed decisions regarding such securities.
The Commission reviews the registration statements for the adequacy of
the disclosure contained therein. Without Form N-5, the Commission
would be unable to carry out the requirements of the Securities Act and
the Investment Company Act for registration of small business
investment companies. The respondents to the collection of information
are small business investment companies seeking to register under the
Investment Company Act and to register their securities for sale to the
public under the Securities Act. The estimated number of respondents is
two and the proposed frequency of response is annually. The estimate of
the total annual reporting burden of the collection of information is
approximately 352 hours per respondent, for a total of 704 hours.
Form N-8A--Notification of Registration of Investment Companies
Form N-8A is the form that investment companies file to notify the
Commission of the existence of active investment companies. After an
investment company has filed its notification of registration under
section 8(a) of the Investment Company Act, the company is then subject
to the provisions of the Act which govern certain aspects of its
organization and activities, such as the composition of its board of
directors and the issuance of senior securities. Form N-8A requires an
investment company to provide its name, state or organization, form of
organization, classification, if it is a management company, the name
and address of each investment adviser of the investment company, the
current value of its total assets and certain other information readily
available to the investment company. If the investment company is
filing simultaneously its notification of registration and registration
statement, Form N-8A requires only that the registrant file the cover
page (giving its name, address and agent for service of process) and
sign the form in order to effect registration.
The Commission uses the information provided in the notification on
Form N-8A to determine the existence of active investment companies and
to enable the Commission to administer the provisions of the Investment
Company Act with respect to those companies. Each year approximately
266 investment companies file a notification on Form N-8A. The
Commission estimates that preparing Form N-8A requires an investment
company to spend approximately one hour so that the total burden of
preparing Form N-8A for all affected investment companies is 266 hours.
Rule 17f-5--Custody of Investment Company Assets Outside the United
States
Rule 17f-5 under the Investment Company Act permits registered
management investment companies (``funds'') to maintain their assets in
custody arrangements outside the United States. The Commission adopted
comprehensive amendments to rule 17f-5 on May 12, 1997.\1\ The
amendments became effective on June 16, 1997, but funds are not yet
required to comply with most of the amendments.\2\ Funds may comply
with either prior rule 17f-5 or with the rule as amended in 1997 until
February 1, 1999.\3\
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\1\ See Custody of Investment Company Assets Outside the United
States, Investment Company Act Release No. 22658 (May 12, 1997) [62
FR 26923 (May 16, 1997)].
\2\ The original compliance date for the 1997 amendments was
June 16, 1998. The Commission has extended this compliance date for
most of the amendments to February 1, 1999. The extension does not
apply to the amended definitions of ``eligible foreign custodian,''
``qualified foreign bank,'' and ``U.S. bank,'' for which the
compliance date remains June 16, 1998.
\3\ Certain amended definitions would apply under either version
of the rule. See supra note 2.
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Before rule 17f-5 was amended in 1997, the rule permitted funds to
maintain their assets with certain foreign banks and securities
depositories subject to certain conditions. The funds's board of
directors had to approve (i) each country where fund assets were
maintained, (ii) each foreign bank or depository that held the assets,
and (iii) a written contract that had to contain specified provisions
governing each foreign custody arrangement. Notes to the rule listed
factors that the board was required to consider when investing assets
in foreign countries and placing them with foreign custodian. The rule
also required the fund board to monitor each foreign custody
arrangement and to approve it at least annually.
As amended in 1997, rule 17f-5 permits a fund's board of directors
to play a more traditional oversight role by delegating its
responsibilities for foreign custody arrangements to a U.S. or foreign
bank custodian or the fund's investment adviser or officers
(collectively with the board, the ``foreign custody manager''). The
board can delegate different responsibilities to different persons. The
board must find that it is reasonably to rely on each delegate it
selects. The delegate must agree to exercise reasonably care, prudence,
and diligence or to adhere to a higher standard of care in performing
the delegated responsibilities. The board must require the delegate to
provide, at times that the board deems reasonable and appropriate,
written reports that notify the board when the fund's assets are placed
with a particular foreign custodian and when any material change occurs
in the fund's foreign custody arrangements.
When the foreign custody manager selects a particular ``eligible
foreign custodian,'' \4\ the foreign custody manager must determine
that, based on its consideration of specified factors, the
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fund's assets will be subject to reasonable care if maintained with
that custodian. The foreign custody manager also must determine that,
based on the same factors, the written contract that governs each
custody arrangement with the foreign custodian (or the set of
depository rules or practices or the combination of a contract and
rules or practices) will provide reasonable care for fund assets. The
written contract (or equivalent rules or practices) must contain either
certain specified provisions, or other provisions that provide the same
or a greater level of care for fund assets. In addition, the foreign
custody manager must establish a system to monitor the contract that
governs each custody arrangement and the appropriateness of maintaining
the fund's assets with a particular foreign custodian.
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\4\ ``Eligible foreign custodians'' under the rule generally
include foreign banks and trust companies, national or transnational
securities depositories, and majority-owned subsidiaries of U.S.
banks or bank holding companies. The compliance date for this
amended definition of eligible foreign custodian remains June 16,
1998.
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The collections of information required under rule 17f-5 are
intended to further the protection of fund assets held in foreign
custody arrangements permitted under the rule, which are more flexible
than the foreign custody arrangements permitted under the Act. The
requirements that the fund board determine that it is reasonable to
rely on each delegate is intended to ensure that the board considers
carefully each delegate's qualifications to perform its
responsibilities. The requirement that the delegate provide written
reports to the board is intended to ensure that the delegate notifies
the board of important developments concerning custody arrangements so
that the board may exercise effective oversight.
The requirement that each custody arrangement by governed by a
written contract (or equivalent rules or practices) that contains
specified provisions or other provisions that provide an equivalent
level of care is intended to ensure that each arrangement is subject to
certain minimal contractual safeguards.\5\ The requirement that the
foreign custody manager establish a monitoring system is intended to
ensure that the foreign custody manager periodically reviews each
custody arrangement and takes any action necessary or appropriate when
changes in circumstances could threaten fund assets.
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\5\ The requirement that the foreign custody manager determine
that the custody contract (or equivalent rules or practices) will
provide reasonable care for fund assets is intended to ensure that
the foreign custody manager weighs the adequacy of contractual
obligations when it determines whether the foreign custodian will
maintain the fund's assets with reasonable care.
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The Commission estimates that during the first year when funds are
required to comply with the 1997 amendments to rule 17f-5, the boards
of directors of approximately 3,690 portfolios that use foreign custody
arrangements will delegate responsibility for their arrangements to
approximately 15 U.S. bank custodians and approximately 650 investment
advisers.\6\
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\6\ The Commission estimates that these 3,690 portfolios are
divided among approximately 1,327 registered funds within
approximately 650 fund complexes that may share the same board of
directors, U.S. bank custodian, investment adviser, or all of thee
entities. The board of directors and its foreign custody delegates
for a fund complex could therefore meet rule 17f-5's requirements by
making similar arrangements for an average of 6 portfolios at the
same time. The Commission also estimates that each portfolio has
foreign custody arrangements with an average of 10 foreign
custodians (i.e., 1 bank and 1 security depository in each of 5
countries).
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The Commission estimates that the board of each portfolio will
expend approximately 2 burden hours during the first year in
determining that the board may reasonably rely on each of two delegates
to evaluate the portfolio's foreign custody arrangements, for a total
7,380 burden hours for all, 3,690 portfolios. The Commission estimates
that each U.S. custodian bank will expend approximately (i) 400 burden
hours in determining for some 250 portfolios that a written contract
containing required terms governs each foreign custody arrangement and
that each contract will provide reasonable care for fund assets; (ii)
96 burden hours in establishing a system for monitoring custody
arrangement and contracts; and (iii) 400 burden hours in providing
periodic reports to fund boards; for a total of 13,440 burden hours for
all 15 U.S. bank custodians. The Commission estimates that each
investment adviser will expend approximately (i) 10 burden hours in
determining for some 6 portfolios that a written contract containing
required terms governs each foreign custody arrangement and that each
contract will provide reasonable care for fund assets; (ii) 24 burden
hours in establishing a system for monitoring certain arrangements and
contracts; and (iii) 10 burden hours in providing periodic reports to
fund boards; for a total of 28,600 burden hours for all 650 investment
advisers.
The total annual burden of the rule's paperwork requirements for
all portfolios, U.S. bank custodians, and investment advisers therefore
is estimated to be 49,420 hours. This estimate represents an increase
of 40,680 hours from the prior estimate of 8,740 hours. Approximately
30,680 hours of the increase are attributable to updated information
about the number of affected portfolios and other entities, and to a
more accurate calculation of the component parts of some information
burdens. Approximately 10,000 hours of the increase are attributable to
the adoption of rule amendments not fully addressed in the prior
estimate.
Written comments are invited on: (a) whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden of the collection of information; (c) ways to enhance the
quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on
respondents, including through use of automated collection techniques
or other forms of information technology. Consideration will be given
to comments and suggestions submitted in writing within 60 days of this
publication.
Please direct your written comments to Michael E. Bartell,
Associate Executive Director, Office of Information Technology,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
DC 20549.
Dated: June 17, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-16754 Filed 6-23-98; 8:45 am]
BILLING CODE 8010-01-M
